United Nations A/CN.9/1004/Add.1

General Assembly

Distr.: General

28 January 2020

Original: English

United Nations Commission

on International Trade Law Working Group III (Investor-State

Dispute Settlement Reform)

Resumed thirty-eighth session

Vienna, 20–24 January 2020

Report of Working Group III (Investor-State Dispute Settlement Reform) on the work of its resumed thirty-eighth session

Contents

Page

I. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

II. Organization of the session 2

III. Deliberations and decisions

IV. Possible reform of investor-State dispute settlement

A. Appellate mechanism

1. General remarks

2. Nature and scope of appeal

3. Effect of appeal

B. Enforcement

1. Enforcement in participating States

2. Enforcement in non-participating States

C. Financing of a permanent body

D. Selection and appointment of ISDS tribunal members

1. Key characteristics

2. Possible reforms

V. Other business

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I. Introduction

1. At its fiftieth session, the Commission had before it notes by the Secretariat on

“Possible future work in the field of dispute settlement: Concurrent proceedings in

international arbitration” (A/CN.9/915); on “Possible future work in the field of

dispute settlement: Ethics in international arbitration” (A/CN.9/916); and on

“Possible future work in the field of dispute settlement: Reforms of investor-State

dispute settlement (ISDS)” (A/CN.9/917). Also, before it was a compilation of

comments by States and international organizations on the ISDS Framework

(A/CN.9/918 and addenda).

2. Having considered the topics in documents A/CN.9/915, A/CN.9/916 and

A/CN.9/917, the Commission entrusted the Working Group with a broad mandate to

work on the possible reform of investor-State dispute settlement (ISDS). In line with

the UNCITRAL process, the Working Group would, in discharging that mandate,

ensure that the deliberations, while benefiting from the widest possible breadth of

available expertise from all stakeholders, would be government -led with high-level

input from all governments, consensus-based and fully transparent. The Working

Group would proceed to: (i) identify and consider concerns regarding ISDS;

(ii) consider whether reform was desirable in light of any identified concerns; and

(iii) if the Working Group were to conclude that reform was desirable, develop any

relevant solutions to be recommended to the Commission. The Commission agreed

that broad discretion should be left to the Working Group in discharging its mandate,

and that any solutions devised would be designed taking into account the ongoing

work of relevant international organizations and with a view of allowing each State

the choice of whether and to what extent it wishes to adopt the relevant solution(s). 1

3. At its thirty-fourth to thirty-eighth sessions, the Working Group considered

possible reform of ISDS on the basis of the mandate. 2

4. At its fifty-first session, in 2018, the Commission noted that the Working Group

would continue its deliberations pursuant to the mandate given to it, allowing

sufficient time for all States to express their views, but without unnecessary delay. 3

At its fifty-second session, in 2019, it expressed its satisfaction with the progress

made by the Working Group through a constructive, inclusive and transparent process

and for the decision of the Working Group to elaborate and develop multiple potential

reform solutions simultaneously. The Commission also expressed its appreciation for

the support provided by the Secretariat. 4 The Commission further expressed its

appreciation for the contributions to the UNCITRAL trust fund from the European

Union, the German Federal Ministry for Economic Cooperation and Development

(BMZ), and the Swiss Agency for Development and Cooperation (SDC), aimed at

allowing the participation of representatives of developing States in the deliberations

of the Working Group as well as participation in regional intersessional meetings, and

was informed about ongoing efforts by the Secretariat to secure additional voluntary

contributions. States were urged to contribute to, and support, those efforts. The

Commission also welcomed the outreach activities of the Secretariat aimed at raising

awareness about the work of the Working Group and ensuring that the process would

remain inclusive and fully transparent.5

5. At its current session, the Working Group expressed its appreciation for the

contributions to the UNCITRAL trust fund from the European Union, France, the

German Federal Ministry for Economic Cooperation and Development (BMZ), and

__________________

1 Official Records of the General Assembly, Seventy-second Session, Supplement No. 17 (A/72/17),

paras. 263 and 264.

2 The deliberations and decisions of the Working Group at its thirty-fourth to

thirty-seventh sessions are set out in documents A/CN.9/930/Rev.1, A/CN.9/930/Rev.1/Add.1;

A/CN.9/935; A/CN.9/964; and A/CN.9/970, respectively.

3 Ibid., Seventy-third Session, Supplement No. 17 (A/73/17), para. 145.

4 Ibid., Seventy-fourth Session, Supplement No. 17 (A/74/17), para. 171.

5 Ibid., Seventy-third Session, Supplement No. 17 (A/73/17), paras. 142–144 and 146 and

Seventy-fourth Session, Supplement No. 17 (A/74/17), paras.161–171.

http://undocs.org/A/CN.9/915http://undocs.org/A/CN.9/916http://undocs.org/A/CN.9/917http://undocs.org/A/CN.9/918http://undocs.org/A/CN.9/915http://undocs.org/A/CN.9/916http://undocs.org/A/CN.9/917http://undocs.org/A/72/17http://undocs.org/A/CN.9/930/Rev.1http://undocs.org/A/CN.9/930/Rev.1/Add.1http://undocs.org/A/CN.9/930http://undocs.org/A/CN.9/930http://undocs.org/A/CN.9/930http://undocs.org/A/73/17http://undocs.org/A/74/17http://undocs.org/A/73/17http://undocs.org/A/74/17

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the Swiss Agency for Development and Cooperation (SDC), that allowed

participation of developing States in the deliberations of the Working Group.

II. Organization of the session

6. The Working Group, which was composed of all States members of the

Commission, held its resumed thirty-eighth session in Vienna from 20 to 24 January

2020. The session was attended by the following States members of the Working

Group: Algeria, Argentina, Australia, Austria, Belarus, Belgium, Brazil, Cameroon,

Canada, Chile, China, Colombia, Croatia, Czechia, Dominican Republic, Ecuador,

Finland, France, Germany, Honduras, Hungary, India, Indonesia, Iran (Islamic

Republic of), Israel, Italy, Japan, Kenya, Lesotho, Libya , Malaysia, Mali, Mauritius,

Mexico, Nigeria, Pakistan, Peru, Philippines, Poland, Republic of Korea, Romania,

Russian Federation, Singapore, South Africa, Spain, Sri Lanka, Switzerland,

Thailand, Turkey, Uganda, Ukraine, United Kingdom of Great Britain and Northern

Ireland, United States of America, Venezuela (Bolivarian Republic of) and Viet Nam.

7. The session was attended by observers from the following States: Albania,

Bahrain, Bolivia (Plurinational State of), Bosnia and Herzegovina, Botswana,

Bulgaria, Burkina Faso, Cambodia, Costa Rica, Cyprus, Democratic Republic of the

Congo, Egypt, El Salvador, Eswatini, Gabon, Gambia, Georgia, Greece, Guinea,

Iceland, Kuwait, Kyrgyzstan, Lebanon, Malta, Montenegro, Morocco, Myanmar,

Netherlands, New Zealand, North Macedonia, Norway, Paraguay, Portugal, Qatar,

Saudi Arabia, Serbia, Slovakia, Sweden, Tanzania (United Republic of), Tunisia and

Uruguay.

8. The session was also attended by observers from the European Union.

9. The session was also attended by observers from the following international

organizations:

(a) United Nations System: International Centre for the Settlement of

Investment Disputes (ICSID); United Nations Conference on Trade and Development

(UNCTAD);

(b) Intergovernmental organizations: African Union, Asian-African Legal

Consultative Organisation (AALCO), Commonwealth Secretariat, Eurasian

Economic Commission, Gulf Cooperation Council (GCC), Maritime Organisation of

West and Central Africa (MOWCA), Organization for Economic Cooperation and

Development (OECD), Permanent Court of Arbitration (PCA) and South Centre.

(c) Invited non-governmental organizations: ACP Legal, African Academy of

International Law Practise (AAILP), African Association of International Law

(AAIL), African Center of International Law Practice (ACILP), American Society of

International Law (ASIL), Arbitral Women, Arbitration Institute of the Stockholm

Chamber of Commerce (SCC), Asian Academy of International Law (AAIL), Asian

International Arbitration Centre (AIAC), Asociación Americana de Derecho

Internacional Privado (ASADIP), Cairo Regional Centre for International

Commercial Arbitration (CRCICA), Center for International Dispute Settlement

(CIDS), Center for International Investment and Commercial Arbitration (CIICA),

Center for International Legal Studies (CILS), Centre for International Governance

Innovation (CIGI), Centre for International Law (CIL), Centre for Research on

Multinational Corporations (SOMO), Chartered Institute of Arbitrators (CIArb),

China International Economic and Trade Arbitration Commission (CIETAC), Client

Earth, Columbia Centre on Sustainable Investment (CCSI), Corporate Counsel

International Arbitration Group (CCIAG), Europa-Institut, European Federation for

Investment Law and Arbitration (EFILA), European Society of International Law

(ESIL), European Trade Union Confederation (ETUC), Forum for International

Conciliation and Arbitration (FICA), Friends of the Earth International (FOEI),

Georgian International Arbitration Centre (GIAC), Hong Kong International

Arbitration Centre (HKIAC), ICOURTS, Institute for Transnational Arbitration (ITA),

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Institute of International Law (IIL), Institutio Ecuatoriano de Arbitraje (IEA),

Inter-Pacific Bar Association (IPBA), International and Comparative Law Research

Centre (ICLRC), International Bar Association (IBA), International Chamber of

Commerce (ICC), International Council for Commercial Arbitration (ICCA),

International Dispute Resolution Institute (IDRI), International Institute for

Environment and Development (IIED), International Institute for Sustainable

Development (IISD), International Law Association (ILA), International Law

Institute (ILI), Korean Commercial Arbitration Board (KCAB), Milan Chamber of

Arbitration, Moot Alumni Association (MAA), New York City Bar Association

(NYCBAR), Pluricourts (UIO), Queen Mary University of London School of

International Arbitration (QMUL), Russian Arbitration Association (RAA),

Singapore International Mediation Centre (SIMC), Swiss Arbitration Association

(ASA), The China Society of Private International Law (CSPIL), The Law

Association for Asia and the Pacific (LAWASIA), Third World Network, United

States Council for International Business (USCIB), and Vienna International

Arbitration Centre (VIAC).

10. The Working Group elected the following officers:

Chairperson: Mr. Shane Spelliscy (Canada)

Rapporteur: Ms. Natalie Yu-Lin Morris-Sharma (Singapore)

11. The Working Group had before it the following documents: (a) annotated

provisional agenda (A/CN.9/WG.III/WP.184); (b) Notes by the Secretariat on the

selection and appointment of ISDS tribunal members (A/CN.9/WG.III/WP.169) and

on appellate and multilateral court mechanisms (A/CN.9/WG.III/WP.185);

(c) Submissions from Governments: Submission from the Government of Indonesia

(A/CN.9/WG.III/WP.156); Submission from the European Union and its member

States (A/CN.9/WG.III/WP.159 and Add.1); Submission from the Government of

Morocco (A/CN.9/WG.III/WP.161); Submission from the Government of Thailand

(A/CN.9/WG.III/WP.162); Submission from the Governments of Chile, Israel and

Japan (A/CN.9/WG.III/WP.163); Submissions from the Government of Costa Rica

(A/CN.9/WG.III/WP.164 and A/CN.9/WG.III/WP.178); Submission from the

Government of Brazil (A/CN.9/WG.III/WP.171); Submission from the Government

of Colombia (A/CN.9/WG.III/WP.173); Submission from the Government of Turkey

(A/CN.9/WG.III/WP.174); Submission from the Government of Ecuador

(A/CN.9/WG.III/WP.175); Submission from the Government of South Africa

(A/CN.9/WG.III/WP.176); Submission from the Government of China

(A/CN.9/WG.III/WP.177); Submission from the Government of the Republic of

Korea (A/CN.9/WG.III/WP.179); Submission from the Government of Bahrain

(A/CN.9/WG.III/WP.180); Submission from the Government of Mali

(A/CN.9/WG.III/WP.181); Submission from the Governments of Chile, Israel, Japan,

Mexico and Peru (A/CN.9/WG.III/WP.182); Submission from the Government of

Kuwait (A/CN.9/WG.III/WP.186); Submission from the Government of Kazakhstan

(A/CN.9/WG.III/WP.187); and Submission from the Government of the Russian

Federation (A/CN.9/WG.III/WP.188 and Add.1).

12. The Working Group adopted the following agenda:

1. Opening of the session.

2. Election of officers.

3. Adoption of the agenda.

4. Possible reform of investor-State dispute settlement (ISDS).

5. Other business.

6. Adoption of the report.

http://undocs.org/A/CN.9/WG.III/WP.148http://undocs.org/A/CN.9/WG.III/WP.169http://undocs.org/A/CN.9/WG.III/WP.185http://undocs.org/A/CN.9/WG.III/WP.156http://undocs.org/A/CN.9/WG.III/WP.159http://undocs.org/A/CN.9/WG.III/WP.161http://undocs.org/A/CN.9/WG.III/WP.162http://undocs.org/A/CN.9/WG.III/WP.163http://undocs.org/A/CN.9/WG.III/WP.164http://undocs.org/A/CN.9/WG.III/WP.178http://undocs.org/A/CN.9/WG.III/WP.171http://undocs.org/A/CN.9/WG.III/WP.173http://undocs.org/A/CN.9/WG.III/WP.174http://undocs.org/A/CN.9/WG.III/WP.175http://undocs.org/A/CN.9/WG.III/WP.176http://undocs.org/A/CN.9/WG.III/WP.177http://undocs.org/A/CN.9/WG.III/WP.179http://undocs.org/A/CN.9/WG.III/WP.180http://undocs.org/A/CN.9/WG.III/WP.181http://undocs.org/A/CN.9/WG.III/WP.182http://undocs.org/A/CN.9/WG.III/WP.186http://undocs.org/A/CN.9/WG.III/WP.187http://undocs.org/A/CN.9/WG.III/WP.188

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III. Deliberations and decisions

13. The Working Group considered agenda item 4 on the basis of documents

referred to in paragraph 11 above and agenda item 5. The deliberations and decisions

of the Working Group with respect to items 4 and 5 are reflected in chapters IV and

V, respectively.

IV. Possible reform of investor-State dispute settlement

14. Based on a decision at its thirty-eighth session (A/CN.9/1004, para. 25), the

Working Group began to consider the following reform options: (i) stand -alone

review or appellate mechanism; (ii) standing multilateral investment court; and (iii)

selection and appointment of arbitrators and adjudicators.

15. In considering those reform options, the Working Group agreed to adopt the

same approach as it had done at its thirty-eighth session and decided to undertake a

preliminary consideration of the relevant issues with the goal of clarifying, defining

and elaborating such options, without prejudice to any delegations´ final position. It

was clarified that the Working Group would not be making any decision on whether

to adopt a particular reform option at this stage of the deliberations.

A. Appellate mechanism

16. The Working Group decided to undertake a preliminary consideration of

questions arising with regard to the establishment of an appellate mechanism as

outlined in document A/CN.9/WG.III/WP.185, paras. 10–33. It was suggested to

consider the main components relating to the nature and scope of appeal and to the

effects of appeals, while noting that the various aspects were interrelated.

1. General remarks

17. During the deliberations, it was pointed out that, in seeking to define and

elaborate the contours of an appellate mechanism, the objectives of creating such a

mechanism should guide any work on the topic including whether different objectives

could yield different outcomes or approaches. Some general remarks were also made

on how an appellate mechanism would operate in ISDS and how it could address the

problems and concerns that had been identified by the Working Group.

18. In the context of those discussions, it was pointed out that the existing

mechanisms for reviewing arbitral awards were too limited, and the goal of creating

an appellate mechanism would be to increase the correctness, consistency,

predictability and coherence of ISDS decisions and hence the legitimacy of ISDS.

The view was also expressed that, in designing such a mechanism, increases in the

costs and duration of proceedings should be avoided.

19. Some questioned whether the key objective would be to ensure the correctness

and quality of the decisions or to enhance the coherence and consistency of the ISDS

regime. It was reiterated that seeking to achieve consistency should not be to the

detriment of the correctness of decisions, and that predictability and correctness

should be the objective rather than uniformity (see also A/CN.9/935, para. 26 and

A/CN.9/964, paras. 25–63).

20. It was further questioned whether an appellate body would be in the position to

address the different standards and texts embodied in the numerous existing

investment treaties. It was stated that, while coherence might be achieved by allowing

an appellate body to render decisions regarding multiple treaties, it might also result

in endowing too much interpretative power to such body.

21. Considering that States would be free to choose whether to adopt that reform

option, concerns were raised that an appellate mechanism would add to the existing

lack of coherence or consistency. It was mentioned that substantive protection

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standards were found in different sources of law, including investment treaties and

domestic investment laws, which resulted in fragmentation. On the other hand, views

were reiterated that there were common standards in those sources of law, that could

be interpreted in a more consistent and predictable manner than currently done by ad

hoc arbitral tribunals.

22. Views were expressed that significant increases in costs and duration seemed

inevitable no matter how the appellate mechanism was designed, and that an

appropriate balance between the benefits of appeal and its burdens would be difficult

to achieve. It was said that there were other effective tools which could achieve the

same objectives of enhancing correctness and consistency in ISDS tribunals ’

decisions, such as scrutiny mechanisms prior to the issuance of a decision, and

mechanisms to increase the role of Parties in treaty interpretation.

23. On the other hand, views were expressed that an appellate mechanism would

actually lead to a decrease in costs and duration of ISDS in the long run as certainty

and predictability were increased, and first level decision makers became more

disciplined and rigorous. It was pointed out that that effect would be even greater with

a permanent appellate mechanism, and even greater if that permanent mechanism was

the second tier of a standing body with permanent first instance mechanis m.

24. It was indicated that the above-mentioned matters (see paras. 18-23 above)

would be considered at a later stage of the deliberations after the main elements of an

appellate mechanism were clarified. It was generally felt that the objectives of

avoiding duplication of review proceedings and further fragmentation as well as of

finding an appropriate balance between the benefits of an appellate mechanism and

any potential costs should guide the work.

2. Nature and scope of appeal

25. The Working Group considered the questions of scope and standard of the

review to be undertaken in an appellate mechanism, if it were to be introduced,

whatever form such mechanism might take – ad hoc appeal mechanism, a permanent

stand-alone appellate body, or an appeal mechanism as the second-tier of a standing

court.

(a) Scope and standard of review

26. With respect to the grounds for appeal (scope of review), it was noted that the

existing procedures for annulment (under the ICSID Convention) or setting aside of

an award were generally limited in scope as they did not allow for the review of the

merits of the decisions rendered by the ISDS tribunals. Therefore, it was suggested

that the grounds of appeals should be broader and possibly encompass the grounds

provided for in such existing procedures (see also para. 30 below). On the other hand,

it was also noted that broadening the scope of review to all issues of law and fact in

the tribunal’s decision would likely have a negative impact on the cost and duration

of the proceedings, which was also an issue that needed to be addressed. Concerns

were raised about the possibility that parties would appeal almost every decision.

Therefore, it was suggested that there should be some limit to the grounds of appeal.

27. It was suggested that the grounds of appeal should include errors in the

interpretation or application of law. In that context, the need to clarify the meaning or

the scope of the “law” in ISDS was highlighted, for example, whether it referred to

investment treaties and notions in public international law or whether it also

encompassed the domestic laws of the respondent State as well as any law applicable

to the dispute. It was also suggested that the grounds could be further limited to certain

issues of law (for example, serious errors of law, common standards found in

investment treaties, like expropriation, fair and equitable standards and non-

discrimination).

28. It was also suggested that the grounds of appeal should cover errors in the

finding of any relevant facts. It was suggested that an error in the assessment of

damages could be another ground of appeal. Similar to the notion of “law”, the need

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to clarify the meaning of “fact” was highlighted, while also noting that it was difficult

to distinguish between issues of law and facts, particularly with regard to investment

disputes where law and facts were often intertwined. For example, it was questioned

whether an error in the understanding of the meaning of domestic law as well as other

relevant rules would be an error of fact and the same for calculation of damages.

29. Some concerns were expressed about the grounds of appeal being so broad as

this would mean a review of all issues de novo, which would have a negative impact

on the cost and duration of the proceedings. Accordingly, views were expressed in

favour of limiting the instances of appeal to errors of law and “manifest” errors of

fact, thereby according some degree of deference to the findings of the first -tier

tribunals. It was said that such standard of review would make an appellate

mechanism relatively streamlined and faster, and the caseload would be easier to

manage. Similar to other terms mentioned above, the need to have a clear

understanding of the terms “de novo review” and “manifest error” was noted. It was

suggested that the possibility of an appellate body conducting a de novo review of

both law and facts to consider other types of errors in exceptional circumstances, such

as where the awarded damages passed a certain threshold, should be explored.

30. Different views were expressed on how an appellate mechanism would interact

with the existing annulment or setting aside procedures and suggestions were made

to clarify that relationship. For example, in order to avoid the duplication of

proceedings and further fragmentation, as well as to ensure efficiency, it was

suggested that the grounds for annulment under the ICSID Convention and the

grounds for refusal of recognition and enforcement of arbitral awards under

Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958,

“New York Convention”) should also be grounds for appeal.

(b) Decisions subject to appeal

(i) Decisions on merits and on procedural matters

31. The Working Group considered whether the scope of appeal should be limited

to decisions on the merits, or whether it should extend to other decisions. It was

suggested that decisions on both merits and procedural matters should be subject to

appeal, with the caveat that appeal should be possible only when those decisions were

final. In that context, the need to ensure both the right to appeal and the efficiency

and manageability of an appellate mechanism was underlined. Concerns were

expressed that if all final decisions were to be subject of an appeal, particularly

decisions on procedural matters like on document production, it could have a negative

impact on the cost and duration.

32. Views were expressed that certain procedural decisions, such as those on

challenges of ISDS tribunal members did not warrant appeal, as it could overburden

the appellate mechanism. It was said that such decisions on challenges were already

subject to review in existing mechanisms, including by domestic courts, and therefore

an appeal could be duplicative.

33. Doubts were expressed on whether decisions on jurisdiction should fall under

the scope of the appellate mechanism. It was suggested that the question of what

decisions would be subject to appeal should be considered in the wider context of the

time frames for an appeal, and whether an appeal could be made while the proceedings

were ongoing. In that context, views were expressed that it might be preferable that

an appellate tribunal be presented with the full record of the case before renderi ng its

decision, and therefore, an appeal should be made possible only after the final

decision on the merits. Other views were expressed that it should be possible to appeal

a decision on jurisdiction at an earlier stage of the proceedings, as that might save

cost and time. It was also suggested that a shorter time frame could be provided for

the parties to appeal a decision as well as for the appellate tribunal to render its

decision on jurisdictional matters.

34. Divergent views were expressed on whether decisions on interim measures

would be subject to appeal. A view was that such measures were often specific to a

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case, temporary in nature, and could be reversed by the tribunal ordering them. It was

suggested that they should not be the subject of appeal, particularly in light of the

negative impact on the cost and duration of the proceedings.

35. A suggestion was made to provide for a screening/filtering mechanism which

would determine decisions that might be subject to appeal and limit frivolous or

unfounded appeals. Further means to deter frivolous or unfounded appeals were

mentioned, including security for cost and cost allocation.

(ii) Decisions by first-tier bodies

36. The Working Group considered a range of bodies (i.e., arbitral tribunals, any

standing multilateral investment court, regional investment courts, and international

commercial courts), the decisions of which could be subject to appeal.

37. It was suggested that decisions made by ISDS tribunals handling disputes

arising out of investment treaties should be subject to appeal. Divergent views were

expressed on whether decisions by ISDS tribunals on disputes arising out of

investment contracts or domestic investment laws should also be subject to appeal. It

was suggested that if such disputes were included, they should be subject to different

procedural rules.

38. Finally, with respect to the decisions made by domestic courts on issues of

foreign investment law, reservations were expressed about such decisions being

reviewed through an international appellate mechanism. Views expressed in favour of

that possibility underlined the benefits of an open architecture, which would leave the

question of consent to the respective State.

3. Effect of appeal

39. The Working Group also discussed a number of issues related to the effect of

appeal including those outlined in document A/CN.9/WG.III/WP.185, paras. 24 to 33.

40. With regard to the powers of an appellate tribunal, it was generally felt that it

should be able to affirm, reverse or modify the decision of the first-tier tribunal and

to render a final decision based on the facts before it. Reference was also made to the

possibility of the appellate tribunal annulling or setting aside the award (as provided

for in existing mechanisms) and the need to avoid duplication.

41. Differing views were expressed with regard to the ability of the appellate

tribunal to remand a case to the first-tier, an issue which was considered to be closely

linked with the scope of review. It was suggested that the current ad hoc nature of

first-tier tribunals as well as the negative impact that such a remand process could

have on the overall duration and cost of the ISDS proceedings would need to be

carefully analysed. The need to balance the increased cost and duration with due

process and fair resolution through a remand mechanism was mentioned. Concerns

were also expressed about a situation where an appellate tribunal would lack remand

authority and it would not have sufficient information on facts to render a final award.

Therefore, views were expressed that an appellate tribunal should have a broad

remand authority. Yet, other views were that remand authority should be provided

only in exceptional circumstances or under limited grounds, where the appellate

tribunal would not be in a position to complete the legal analysis based on the facts

available before it.

42. In relation to the question of remand authority, some questions were raised, for

example, on how to re-establish the first-tier tribunal (if it had already been dissolved)

and the additional costs which might be incurred, whether the award by the first -tier

tribunal as revised would be final or subject to further appeal, whether a specific

request for remand should come from one or all of the parties to the dispute, and how

to address a situation where the appellate tribunal found procedural irregularities (for

example, lack of independence), which would make it inappropriate to remand the

case to the first-tier tribunal.

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43. It was suggested that an appeal should temporarily suspend the effect of the

first-tier decision (pending a decision by an appellate tribunal) and that such a

decision should not be enforceable, possibly through a stay on enforcement, nor

subject to a set-aside procedure. In that regard, a question was raised whether

decisions by an appellate tribunal would be binding on the domestic courts faced with

requests for enforcement. The need to avoid duplication of proceedings including with

regard to the enforcement was highlighted, while the need to preserve the enforcement

mechanism through domestic courts was also emphasized.

44. Different views were expressed on the interpretative effect a decision rendered

by an appellate tribunal should have. Some doubts were expressed about establishing

a system of precedent (doctrine of stare decisis) and it was said that a decision

rendered by an appellate tribunal should bind only the disputing parties and in case

of remand, the first-tier tribunal. Another view was that the appellate body decision

should have a broader effect to ensure consistency, particularly in cases where the

tribunals would be interpreting the same provisions of an investment treaty or similar

text. It was further noted that the design and features of an appellate body as well as

the nature of the first-tier tribunals would have an impact on the effect of the decision.

45. It was noted that decisions rendered through a permanent appellate mechan ism,

even though they might not be binding on other ad hoc first-tier tribunals, could have

a persuasive influence on those tribunals when interpreting identical or similar treaty

provisions. At the same time, it was noted that the interpretative impact that a decision

of an appellate tribunal could have on treaties with identical or similar language (in

particular, when the relevant State party was not a party to the appellate mechanism)

would need to be further examined to take into account both how to manage the

interpretative impact for future disputes and in light of existing interpretation of such

provisions, among other implication. It was also noted that the creation of an appellate

body would not address the concerns with respect to inconsistency in ISDS, as not all

States would be parties to that body and disputes arising from bilateral investment

treaties would continue to be addressed by different arbitration tribunals.

46. With regard to concerns expressed about possibly incorrect decisions rendered

by an appellate tribunal (which might have a binding effect), it was noted that

mechanisms could be envisaged which would make it possible for an appellate

tribunal to rectify its previous decision in exceptional circumstances.

47. It was generally felt that States Parties to an investment treaty should be given

the opportunity to express their views on treaty interpretation during the appellate

procedure. It was suggested that appellate tribunals should be required to accord

deference to any joint interpretation by treaty Parties or to treat it as binding when the

treaty designate it as such. It was questioned whether the appellate body should take

into account joint interpretations submitted by treaty parties after the first-tier tribunal

had rendered its decision. It was further suggested that an appellate mechanism could

provide a forum for relevant parties (including non-disputing Parties as well as any

other affected or interested third parties) to be involved in the interpretation process,

while the need to ensure the independence and impartiality of the appellate tribunal

was also highlighted.

48. Diverging views were expressed on whether a decision by an appellate tribunal

should be subject to confirmation or some review by the States Parties t o the relevant

investment treaty. In that context, reference was made to the review of interim panel

reports, or adoption of the panel or Appellate Body Reports, in the WTO through

reverse consensus.

49. It was noted that while an appellate mechanism could address some of the

concerns identified by the Working Group, the effectiveness in addressing those

concerns would largely depend on the design of such a mechanism. For example, how

an appellate mechanism could alleviate or aggravate concerns regarding consistency,

correctness, costs, duration, diversity and independence would depend on the precise

features along with a number of trade-offs among those features.

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50. Considering some of the limitations that an appellate mechanism possessed, it

was suggested that the viability of other alternative solutions (for example, interim

awards, non-disputing party submission, joint interpretation, scrutiny of award) to

address the concerns that an appellate mechanism aimed to address could be further

analysed along with an appellate mechanism.

51. During the deliberation, some empirical observations were shared. The first was

that ISDS so far had only addressed a small number of treaties and many of them

multiple times – about 400 investment treaties had provided the basis for the 1,126

known treaty-based ISDS cases, with 546 cases resulting in awards with interpretation

of 190 treaties. The second observation was that approximately 60 ISDS awards were

rendered annually, which could provide a foresight on the workload of an appellate

mechanism.

Preparatory work on appellate mechanism

52. After discussion, the Working Group agreed to consider further an appellate

mechanism in ISDS as one of its possible reform options. In order to develop the

option further, the Working Group provided the following guidance to the Secretariat

(see paras. 53–61 below) in conducting preparatory work on the nature, scope and

effect of appeal. It was said that the preparatory work could aim at preparing draft

provisions regarding those matters as well as providing information on any other

identified questions. The Secretariat was requested to present the different aspects in

a tabular form (as provided in document A/CN.9/WG.III/WP.166/Add.1) or list the

questions to be addressed by the Working Group.

53. First, further development and elaboration of a number of the key terms would

be needed (for example, “de novo” review and “manifest errors of fact”, see para. 29

above). The meanings of the phrases “errors of law” and “errors of fact” would also

need to be clarified, including whether an error in the application of the law to the

facts as well as whether and under what circumstances questions of domestic law

should be treated as errors of law or of fact.

54. Second, further elaboration on how to ensure a manageable caseload and to

avoid systematic appeals by disputing parties would be necessary. For that purpose,

information could be sought on how existing bodies managed their caseload, whether

there were any conditions imposed on appeals and existing mechanisms to deter

frivolous appeals such as security for costs, cost allocation and early dismissal.

55. Third, further elaboration would be needed on the types of decisions that would

be subject to appeal and the time period during which parties would be allowed to

make such appeal.

56. Fourth, further elaboration would be needed on how an appellate mechanism

might work outside the context of treaty-based ISDS, such as where the basis for

jurisdiction were a foreign investment law or an investment contract.

57. Fifth, clarification would need to be sought on any system of binding precedent

in an appellate mechanism and, in particular, how it could interact with ad hoc

arbitration. More broadly, further elaboration would be required on the interaction

between an appellate mechanism and existing ISDS mechanisms.

58. Sixth, further work would be done on the impact that a decision of an appellate

tribunal could have on the interpretation of treaties with similar or identical language

(in particular, when the relevant State party was not a party to the appellate

mechanism) and how to minimize any unintended consequences.

59. Seventh, the possible remand authority of an appellate tribunal would need to

be reviewed further, in particular, to ensure that remand, if allowed, would not unduly

increase cost and duration. In addition, some guidance could be provided to appellate

tribunals on when to exercise its remand authority.

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60. Eighth, further consideration should be given to the possible participation in the

appellate proceedings of non-disputing States that are not parties to the relevant

investment treaty, including the conditions for such participation.

61. Lastly, the potential impact of the place of arbitration or appeal on the overall

functioning of the appellate mechanism would need to be further analysed , including

its compatibility with domestic set-aside procedures in non-ICSID cases.

B. Enforcement

62. The Working Group undertook a preliminary consideration of issues related to

the enforcement of decisions rendered through a permanent appellate mechanism or

a standing first-tier body (referred to in this section as “decisions rendered by a

permanent body”). It was emphasized that enforcement was a key feature of any

system of justice and essential to ensure its effectiveness. It was recalled that awards

rendered by ISDS tribunals were generally enforceable through the New York

Convention and the ICSID Convention, which provided a robust regime for

enforcement. During the deliberations, it was generally acknowledged that the

possible application of the existing enforcement mechanisms to decisions rendered by

a permanent body would depend on how such a body would be set up, in particular

the extent to which its decisions could qualify as arbitral awards.

63. Questions under consideration included: (i) how decisions rendered by a

permanent body would become enforceable, in particular, whether the instrument

establishing such a permanent body (referred to below as the “founding convention”)

would include a specific enforcement regime; and (ii) if so, how decisions of a

permanent body could be enforced in States that were not party to the founding

convention (referred to in this section as “non-participating States”) as those States

would not be bound by any enforcement regime provided therein.

1. Enforcement in participating States

64. It was suggested that if a permanent body were to be established, it would be

preferable that its founding convention included an internal enforcement mechanism.

It was indicated that the enforcement mechanism provided for in article 54 of the

ICSID Convention, as well as language in recent bilateral and multilateral investment

treaties could provide useful models. It was noted that provisions in such investment

treaties addressed both the deemed applicability of the New York Convention and the

ICSID Convention and the obligations of the disputing parties with respect to

enforcement.

65. It was suggested that consideration should be given to potential conflicts

between the internal enforcement mechanism in the founding convention and existing

enforcement regimes, for example, the risk that a disputing party might seek

enforcement of an ICSID award in a non-participating State while the appeal was

pending or after such award was reversed. It was said that such situations could arise

in States which implemented the ICSID Convention, and thus consented to treating

ICSID awards as final judgments of their own domestic courts. It was pointed out that

such matters would deserve in-depth analysis and research.

66. It was highlighted that if an internal enforcement mechanism were to be

developed, attention should be given to the assets of a State that would be subject to

enforcement as well as issues relating to State immunity. In that regard, reference was

made to the 2004 United Nations Convention on Jurisdictional Immunities of States

and Their Property (which applied to the immunity of a State and its property from

the jurisdiction of the courts of another State) and article 55 of the ICSID Convention.

67. It was, however, questioned whether an internal enforcement mechanism based

on models such as the ICSID Convention and recent investment treaties should be

followed. As an alternative, it was suggested that a model which preserved the role

for domestic courts possibly based on the New York Convention would be preferable.

It was said that such a model would avoid the situation where a domestic court would

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be required to enforce decisions that were contrary to the public policy of the State

where enforcement was sought.

68. In that context, it was suggested that if an appellate mechanism were to be

introduced for the review of arbitral awards, that would most probably not change the

nature of the whole process, as there already existed examples of arbitration regimes,

whether under institutional arbitration rules or national laws, which provided for a

review of arbitral awards. In such circumstances, it could be envisaged that the New

York Convention would apply.

2. Enforcement in non-participating States

69. With respect to enforcement of decisions rendered by a permanent body in

non-participating States, considerations focused on the extent to which the New York

Convention and the ICSID Convention would have an impact.

(a) New York Convention

70. The possibility of relying on the New York Convention for the enforcement of

decisions by a permanent body in non-participating States was considered. It was

stated that the New York Convention provided sufficient flexibility to apply to

decisions rendered by a permanent body. Article 1(2) of the New York Convention

was mentioned, which referred to awards “made by permanent arbitral bodies to

which the parties have submitted”. A question raised was whether a permanent body

could qualify as a “permanent arbitral body” under that article. Reference was made

to case law with respect to the enforcement in United States court of decisions

rendered by the Iran-United States Claims Tribunal, although it was also noted that

the United States was a party to the Iran-United States Claim Tribunal. Reference was

also made to the information contained in the UNCITRAL Secretariat Guide on the

New York Convention.

71. It was pointed out that domestic courts which interpreted and applied the New

York Convention could render divergent decisions on whether the Convention applied

to decisions rendered by a permanent body. On the other hand, it was said that the

interpretation and application of the New York Convention was not a question of

domestic law even though it might be interpreted by domestic courts – instead its

interpretation was a question of public international law. It was said that the New York

Convention did not contain a dispute settlement clause and therefore that the divergent

interpretation and application could subsist for a long time.

72. In that regard, it was suggested that means should be sought to provide more

certainty regarding the application of the New York Convention. A suggestion was

made that a provision could be inserted in the founding convention, indicating the

intention of the participating Parties that the New York Convention would be deemed

to apply to decisions rendered by a permanent body. The effect that such a provision

could have on non-participating States was questioned.

73. Another suggestion was that a recommendation on the interpretation of

article 1(2) the New York Convention could be prepared (similar to the

Recommendation regarding the interpretation of art. II, para. 2, and art. VII, para. 1,

of the New York Convention prepared by UNCITRAL in 2006), which would indicate

that the New York Convention applied to decisions rendered by the permanent body

(for example, considering it to be a “permanent arbitral body” and its decisions to be

“foreign arbitral awards”) to guide domestic courts faced with the enforcement.

74. It was questioned whether there was a need to address enforcement in

non-participating States, based on the argument that most decisions by ISDS tribunals

were voluntarily complied with. It was said that the current rate of compliance

resulted from the efficiency of the enforcement regimes under the New York

Convention and the ICSID Convention. In that context, it was questioned whether the

implementation of the reform options being considered by the Working Group could

lead to a similar or higher level of compliance.

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75. It was pointed out that compliance by investors with decisions made by ISDS

tribunals was a matter that deserved consideration because the compliance rate of

investors with regard to cost awards was substantially lower than that of States. A

suggestion was made that other mechanisms to ensure investor compliance could be

considered, such as security for costs, while it was also noted that the use of such tool

was limited under current practice.

76. It was generally felt that further analysis would be required including on

instances where enforcement was sought against a State or an investor, where it was

sought in a State other than the respondent State, and how successful those attempts

were.

77. The view was also expressed that the non-enforceability of decisions in

non-participating States was a risk that could be borne in the process of reform. A

suggestion to alleviate that risk was to permit non-participating States to opt into the

enforcement mechanism that would be established under the founding convention.

(b) ICSID Convention

78. The compatibility of an appellate mechanism with the ICSID Convention was

discussed. It was noted that article 53 of the ICSID Convention provided that ICSID

awards should “not be subject to any appeal or to any other remedy except those

provided for in the Convention”. It was explained that, as the amendment of the

Convention in accordance with article 66 would be difficult to implement, a possible

avenue to explore would be an inter se modification of the ICSID Convention among

the States establishing an appellate mechanism. It was further explained that such

modification could be implemented following the procedure of article 41 of the

Vienna Convention on the Law of Treaties (VCLT), whereby contracting parties might

modify a treaty “as between themselves alone”.

79. However, doubts were expressed whether article 41 of the VCLT could provide

a basis for inter se modification of the ICSID Convention, given the conditions

enumerated therein. It was suggested that that matter deserved further research by the

Secretariat in coordination with the Secretariat of ICSID.

(c) Other questions

80. During the deliberations, various points were raised, including:

- The impact that the law applicable at the seat of a permanent body would

have on the enforcement;

- The interaction with arbitration laws based on the UNCITRAL Model Law

on International Commercial Arbitration, which provided that “recourse to

a court against an arbitral award may be made only by an application for

setting aside (...).”;

- Whether participating States would be able to waive the right of review

under article V of the New York Convention and the implication such a

waiver could have on non-participating States;

- Whether and to what extent to maintain the role for domestic courts in

scrutinizing arbitral awards that were contrary to mandatory rules of law

and essential public policies;

- How to address enforcement if the appellate mechanism were set up ad

hoc and not as a permanent body;

- The possible role of States in facilitating enforcement , such as through

joint commissions or committees;

- The effect of a stay to enforcement; and

- Whether domestic laws on the enforcement of foreign judgments or other

international mechanisms, such as that provided in the 2019 Hague

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Convention on the Recognition and Enforcement of Foreign Judgements

in Civil or Commercial Matters, could provide means of enforcement.

Preparatory work on enforcement

81. After discussion, the Working Group agreed to consider further the question of

enforcement of decisions by a permanent body. The Secretariat was requested to

conduct preparatory work on that topic, which would aim to provide an in -depth

analysis of the questions raised during the deliberations and information on provisions

in existing international instruments and on how such provisions could be adapted in

the context of a permanent body.

C. Financing of a permanent body

82. The Working Group had a preliminary discussion on the financing of a

permanent body, which could be tasked with handling appeals or composed of two -

tiers to hear disputes.

83. The following were identified as the key budget components of such a

permanent body:

- The remuneration of the adjudicators, which would depend on the number of

adjudicators, their employment status (fully-employed, part-time) as well as

the basis for their salaries, privileges and immunities including tax benefits

and pension schemes;

- Cost related to the administration of the case;

- Cost of administrative staff supporting the tribunals, which would vary

depending on the number of staff, their employment status and their salary

structure as well as the services to be provided;

- Overhead cost of the permanent body, for example, the cost of premises,

facilities, maintenance, security, communication and others.

84. It was suggested that a distinction could be made between the financing needed

for the general operation of the permanent body and the costs related to administering

ISDS cases, with the former allocated to participating States and the latter to disputing

parties.

85. As to the sources of financing, a number of views were expressed.

86. One view was that a permanent body could be financed by States parties to the

founding convention, which would ensure a more sustainable operation of the body.

As to how those States would share the burden, different models could be sought

based on examples of other international bodies. It was suggested that in asses sing

the contributions, the level of economic development and the number of claims

brought against the respective States could be taken into account. It was, however,

noted that such a contribution structure could have the negative consequence of

certain States having more influence in the selection of adjudicators as well as the

operation of the permanent body and thus it was suggested that disputing parties

should be responsible for the financing with the remaining costs to be equally borne

by the participating States. It was suggested to further consider the means to safeguard

the independence of the permanent body and to ensure that there would be no

discrimination based on contributions provided by States.

87. It was also noted that the number of participating States might change over time,

which would also need to be taken into consideration.

88. While the financing through voluntary contributions was mentioned, it was also

stated that such a mechanism would be volatile and might not ensure the independence

of a permanent body as it could be subject to undue influence by the donors.

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89. Another view was that the current practice of the disputing parties paying the

costs of ISDS should be preserved. It was stated that that would better reflect the

principle of equitability as those using the permanent body would be responsible for

its expenses. It was suggested that a user-pay system in that case would ensure

accountability and could deter systematic appeals as well as frivolous claims. It was

also suggested that a user-pay system would allow for more scalability and flexibility

in the operation of a permanent body as caseload increased or decreased. It was further

suggested that a user-pay system should be designed so as to ensure that the disputing

parties would not be directly remunerating the adjudicators and that it would not give

that perception.

90. While the principle of equitability was highlighted, it was suggested that

consideration should be given to small- and medium-sized enterprises as well as

developing and least developed States when calculating the costs. Also noting that the

legal fees of the disputing parties constituted a substantive portion of the cost of ISDS,

it was suggested that means to reduce such fees could be considered.

91. Yet another view was that the sources of financing should be mixed based on

contributions from both participating States and disputing parties. However, it was

noted that that could be burdensome on respondent States, as they would be

contributing as a participating State and as a disputing party. It was suggested that

different formulas could be developed with regard to such a hybrid financing

mechanism.

92. As a general point, it was said that in case of the establishment of a permanent

body, it should not lead to unjustifiable increase in burden of developing States in

comparison with the existing system.

93. In addition to the above, it was said that the following aspects should be

considered:

- The quality and reliability of services rendered;

- The long-term sustainability;

- Whether the permanent body would be established as an intergovernmental

body or through existing institutions;

- The transitional financing measures until the standing mechanism could

operate in a sustainable manner;

- Contingency plans to address the possible lack of funds, for example, when

the participating States did not pay their dues; and

- The flexibility in the budget structure to reflect the caseload including the

possible accumulation of cases.

Preparatory work on financing of a permanent body

94. After discussion, it was agreed that exploratory work would be required on the

financing aspects of a permanent body. The Secretariat was requested to continue to

analyse and develop the options further taking into account the views expressed

above. It was noted that such work could include an examination of hybrid models

for financing, an examination of assessed contribution schemes for participating

States which would also address the concerns expressed about undue influence by

States with larger contributions, and a preliminary analysis on the potential budget of

a permanent body based on comparable international judicial bodies.

D. Selection and appointment of ISDS tribunal members

95. The Working Group undertook a preliminary consideration of the selection

and appointment of ISDS tribunal members on the basis of document

A/CN.9/WG.III/WP.169.

http://undocs.org/A/CN.9/WG.III/WP.169

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1. Key characteristics

(a) Qualifications and requirements

96. The Working Group considered the qualifications and requirements that ought

to be met by individuals serving as ISDS tribunal members. They included certain

competences, knowledge of the subject matter, independence and impartiality,

accountability and integrity.

97. Regarding competence, it was generally felt that ISDS tribunal members should

be cognizant of public international law, international trade and investment law. It

was said that consideration could be given to expertise in private international law. It

was further suggested that they should have an understanding of the different policies

underlying investment, of issues of sustainable development, of how to handle ISDS

cases and of how governments operated. In addition, it was mentioned that specific

knowledge might be required with regard to the dispute at hand, for example,

industry-specific knowledge, knowledge of the relevant domestic legal system and

calculation of damages.

98. However, caution was expressed that if the qualifications were too many or too

strict, it could reduce the pool of qualified individuals, which would run against the

aim of achieving diversity.

99. It was further said that ISDS tribunal members should be neutral, independent

and impartial. In addition, it was stated that they should possess high moral character

and be accountable.

100. It was questioned whether the nationality or place of residence should have any

impact on whether a person could serve as an ISDS tribunal member in a case

involving that State, although it was noted that nationality could be important for

legitimacy and accountability.

(b) Ensuring diversity

101. It was reiterated that geographical, gender and linguistic diversity as well as

equitable representation of the different legal systems and cultures would be of

essence in the ISDS system. It was highlighted that achieving diversity would enhance

the quality of the ISDS process, as different perspectives, especially from different

cultures and different levels of economic development could ensure a more balanced

decision making. Diversity in age was also mentioned, which would allow younger

professionals to be introduced to the ISDS field and thereby enlarge the pool of

potential candidates. While it was said that specific measures would need to be taken

to achieve adequate gender diversity, doubts were also expressed. It was also pointed

out that achieving diversity need not be a goal in itself as the ultimate goal of ISDS

would be a fair and efficient resolution of the dispute at hand.

2. Possible reform options

102. The Working Group considered the reform options in relation to the selection

and appointment of ISDS tribunal members, which included the establishment of a

roster of qualified candidates and the setting up of a permanent body composed of

full-time adjudicators.

103. Views were expressed in support of the current methods of selection and

appointment of ISDS tribunal members based on party appointment. It was said that

both claimant investors and respondent States enjoyed broad autonomy in the

selection and appointment of arbitrators under the current ISDS regime, which should

be preserved in the context of other reforms under consideration, such as a code of

conduct. It was said that such a mechanism whereby disputing parties had a say in the

constitution of the tribunal brought confidence in the current ISDS system,

particularly to the investors but also to States regarding their accountability to their

policy stakeholders.

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104. It was, however, suggested that there was a need to revisit the party-appointment

mechanism in ISDS and to limit the involvement of the disputing parties, as party

autonomy need not be a key component of ISDS. In support, it was said that party

appointment was the main reason leading to concerns about the lack or apparent lack

of independence and impartiality of decision makers in ISDS. It was further suggested

that reforms would need to address all the concerns identified by the Working Group

in a holistic manner.

(a) Establishment of a roster

105. Suggestions were made to regulate the method of selecting and appointing

arbitrators, while preserving party autonomy, by establishing a list or roster of

arbitrators. Further aspects to take into account included establishing more

transparent procedures as limited information about selection and appointment

methods were available, in particular where an appointing authority was involved.

106. Various models for establishing a roster were suggested, including a

pre-established list of arbitrators who fulfilled the set criteria. It was noted that such

a list could be open (and thus be indicative) or closed (thus restricting the choice of

the disputing parties).

107. It was mentioned that rosters of pre-selected arbitrators were found in

investment treaties. Therefore, it was suggested that reforms could consist in

determining the criteria to be used by treaty Parties in establishing the roster.

108. It was suggested that in order to preserve the balance of the current system, both

States and investors should be involved in the establishment of a roster, while another

view was that only States should be involved in the establishment of a roster. Other

selection and appointment mechanisms were also highlighted.

109. In line with the discussions above on qualifications of ISDS tribunal members,

it was said that a roster would not need to be extensive but should list names of

established arbitrators specialized in ISDS while also including new candidates to

assist them in their appointment. A mechanism for the renewal of arbitrators on such

a roster was considered necessary to ensure flexibility and to address the concern of

lack of diversity. It was suggested that there could be a limited duration for a person

to be placed on a roster, and possibly a period after which that person would be

de-listed.

110. It was suggested that the administration of a roster should include a procedure

to remove an arbitrator. Such removal procedure, however, would require

sophisticated institutional mechanisms for evaluating and assessing the conduct of

that arbitrator. In that regard, it was suggested that further study could be carried out,

including on the possible role of existing arbitral institutions.

111. In that context, it was underlined that the conditions applicable to the

management of the roster would deserve careful consideration. It was further said that

the extent to which that proposed reform option could achieve its purpose, especially

in a larger scale or in a multilateral context, depended largely on the role of the

authority responsible for the roster.

112. It was suggested that arbitral institutions active in the field of ISDS already

managed rosters of arbitrators and could therefore assist in the establishment of a

roster and be more involved in providing assistance to the disputing parties in their

selection and appointment of tribunal members. It was said that that would entail

ensuring the independence and impartiality of such institutions, as well as more

transparency in their role.

113. Comments were made on whether a roster could address some of the identified

concerns. It was pointed out that if a roster only provided a directory of individuals,

it would have minimal impact on improving the current appointment mechanism. It

was suggested that other reform options (for example, a code of conduct) would also

need to be pursued to address concerns on repeat appointments, conflict of interest,

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and the practice of double hatting (individuals switching roles as arbitrator, counsel

and expert in different ISDS proceedings). In addition, it was said that the lack of

diversity could not be adequately addressed by establishing a roster, as a list of diverse

candidates would not necessarily result in greater diversity in the tribunal members.

In that context, the need for training opportunities for potential arbitrators as well as

other technical assistance activities was highlighted.

(b) A permanent body composed of full-time adjudicators

114. The Working Group also had a preliminary discussion on the selection and

appointment of adjudicators in a permanent body.

115. On how to compose a permanent body, a number of questions were raised,

including whether all or some participating States would be represented in the body.

It was suggested that the full representation might be difficult to achieve, also noting

the cost implications. It was also suggested that the number of the adjudicators might

need to evolve over time, due to an increasing number of participating States and

increased caseload. It was stated that broad geographical representation as well as a

balance of representation between developed, developing and least developed

countries should be sought.

116. With regard to the possible ways of nominating candidates, a number of options

were presented including nominations by participating States, by an independent

entity established within the permanent body and by interested individuals

themselves.

117. With regard to nominations by participating States, it was suggested that States

should be able to nominate more than one candidate, which need not necessarily be

its national. Differing views were expressed on whether the nomination and

eventually the selection of the adjudicators by States would lead to the adjudicators

being biased to favour State interests.

118. With regard to the selection process, a number of options were presented,

including an election involving the participating States (through a vote or by

consensus) or selection by a committee, possibly under the auspices of a body within

the United Nations system. Lists established by such committee could then be

endorsed by States. It was also suggested that the screening process could be multi -

layered. Calls for transparency and fairness in the process were reiterated.

119. With regard to an election which would involve participating States, it was said

that States should be able to vote for more than one candidate, which could ensure

some balance and diversity. It was also said that elections through votes were

favoured over election by consensus, which could be used to block the selection

process. However, it was pointed out that elections involving participating States

might be unduly influenced by other factors in international politics and that the

selection process should be designed to be immune from such factors.

120. It was further noted that the selection process could involve a screening stage,

during which a screening or advisory panel would review the candidates to ascertain

that they fulfilled the set requirements (such as professional qualif ications, expertise

or language). It was stated that such screening by neutral independent bodies could

contribute to a rigorous and transparent selection. However, questions were raised

about how such bodies would be composed without being unduly influenced by

participating States.

121. It was further noted that the selection process could involve a consultation stage

whereby certain stakeholders could take part in the selection process (for example,

representatives of investors). It was said that consultations might extend to other

stakeholders, who had an interest in the interpretation and application of investment

treaties and the outcome of the dispute (for example, professional associations in the

field of international law and civil society). It was said that such consultations could

enhance transparency in the selection process and endow a broader acceptance of the

dispute mechanism and thus foster its ultimate credibility and legitimacy. However,

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doubts were expressed on how the views of those stakeholders could be properly

captured in the consultation process. Therefore, it was suggested that other means to

engage with stakeholders could be sought.

122. It was also noted that the nomination and the selection process as well as the

criteria to be applied could differ for members of the first-tier and the second-tier.

The role to be played by the secretariat of the permanent body in the nomination and

selection process was also questioned.

123. The qualification and requirements mentioned above (see paras. 96–100 above)

would generally apply to adjudicators of a permanent body. As to the duration of their

terms and the possibility of renewal, a number of options were mentioned including

the possibility of longer terms on a non-renewable basis, which could ensure that the

members would not be affected by undue influence. The need to ensure financial

security was noted. It was suggested that the adjudicators should be subject to

limitations on other professional activities so as to ensure their independence and

integrity.

124. A number of questions were raised on how to assign a case to members of a

permanent body, for example, the authority responsible for assigning the case, the

method of assigning the case and any criteria to be applied.

125. On the authority for assigning the case, it was suggested that the president of

the permanent body could undertake that role based on established criteria. While the

possible involvement of participating States or disputing parties in the process was

mentioned, it was said that there was a need to preserve the independence and

neutrality of the assignment process so that it would not be influenced by any political

consideration. It was also stated that there should be clear, pre -defined methods for

assigning cases. The possibility of assigning cases on a random basis was mentioned.

126. Some questions were raised on the criteria to be applied in assigning the cases.

It was suggested that the assignment should consider the specificities of the case,

including whether a developing State was involved and the need for the tribunal to

consider a number of other aspects (for example, environmental and social aspects or

investment promotion). The need to assign the most appropriate member to handle

the case was mentioned. With regard to a case where the assigned member might not

have the specific expertise to handle some of the issues (for example, calculation of

damages), the possibility of engaging with experts was mentioned. Questions were

raised on how the assignment process could ensure diversity of the adjudicators.

127. It was further noted that there would be a need to manage the caseload of the

different members of the permanent body so as to ensure balance of work and the

rotation policy was mentioned. It was also mentioned that the assignment pro cess

would need to consider the remaining term of each of the adjudicators. It was also

suggested that a cooling-off period should be introduced to limit the activities that the

adjudicator could take part in after his/her term expired, which would ensure further

neutrality.

128. It was stated that rules on challenges should be clearly set out and it was

suggested that decisions on challenges should not be left to the assigned adjudicator.

The possible role of the presiding adjudicator in those circumstances and more

broadly in the assignment process was questioned. In that context, the need for a

stringent code of conduct and possible sanctions for non-compliance was highlighted.

129. While it was suggested that a permanent body could alleviate concerns about

“repeat appointments”, it was also noted that if the number of the members of a

permanent body was limited, repeat appointments would be apparent.

130. In the context of the discussions, it was noted that the following aspects would

also need to be given consideration:

• The location of the permanent body;

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• Whether it would be hosted within an existing organization (possibly a body

within the United Nations) or as a separate body;

• The need to put in place a mechanism to rectify any problems that could arise

after the body was set up;

• The need to ensure sustainability and equitability;

• Means to ensure diversity in the composition of the secretariat; and

• The possible role of the permanent body in handling State-to-State disputes.

Preparatory work on selection and appointment of ISDS tribunal members

131. After discussion, it was agreed that further exploratory work would be required

on the selection and appointment of ISDS tribunal members.

132. With respect to the qualifications and requirements of ISDS tribunal members,

the Secretariat was requested to prepare options covering the different aspects

identified during the deliberations, including the intended or any unintended

consequences those qualifications and requirements could have either individually or

collectively on the concerns identified by the Working Group, for example, on

ensuring diversity. The Secretariat was further requested to present different options

for incorporating those qualifications and requirements into investment treaties or any

other relevant instrument.

133. With regard to the selection and appointment of ISDS tribunal members, the

Secretariat was requested to further analyse the different mechanisms considered by

the Working Group and to develop them for future consideration, including how those

mechanisms, either individually or in combination, could be adapted and

implemented in light of the wide range of reform options. It was stated that the

specific features would largely depend on the broader design of how ISDS would be

conducted, including whether the ad hoc nature would be preserved or whether a

permanent structure would be sought.

V. Other business

134. At the end of the session, the Working Group was informed of the preparatory

work undertaken by the Secretariat on the reform options to be considered at its next

session, scheduled to be held in New York from 30 March to 3 April 2020.

135. The Working Group was also informed of the follow-up work being undertaken

by the Secretariat on the reform options considered in Vienna last fall. Regarding the

establishment of an advisory centre, it was noted that the Secretariat and the Academic

Forum would organise the first webinar on 21 April 2020. States and organizations

invited to the Working Group were invited to participate in the webinar, details of

which would be available on the UNCITRAL website. It was further noted that a

questionnaire would be circulated to States and to international organizations to

collect information on existing capacity building activities in the field of ISDS.

Regarding a code of conduct, it was noted that the Secretariat and the ICSID

Secretariat were jointly preparing a draft code for consideration by the Working

Group. Regarding third-party funding, it was noted that Secretariat was continuing to

conduct research on the topic and would be preparing a draft text on its possible

regulation. In addition to those topics, it was noted that the Secretariat was

cooperating with ICCA and the Academic Forum to conduct further studies on

damages and related issues. The Working Group was informed of a number of events

in which the Secretariat took part to provide an update on the current progress being

made by the Working Group.

136. The Working Group welcomed the proposal from the government of the

People’s Republic of China to host an inter-sessional meeting in Hong Kong Special

Administrative Region, China during the first week of June 2020. It was noted that

one of the proposed topics for discussion at the intersessional meeting would be

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investment mediation. The Secretariat was requested to work closely with the

Government of China and other governments expressing an interest in holding inter -

sessional meetings and to provide an update at its next session in New York, based on

which the Working Group could allocate topics that it wished to discuss further

through those meetings. The Working Group also took note of the plans to hold a joint

workshop with OECD on the topic of reflective loss and shareholder claims,

tentatively scheduled for early July. Lastly, it was mentioned that the Secretariat was

planning to hold a roundtable dialogue in cooperation with the ICC during the first

half of 2020 to obtain the views of the investors with regard to the reform options

being discussed by the Working Group.